Owner of British Gas warns tariff price cap will hit performance

THE OWNER of British Gas has warned that its financial performance in 2019 will be hit by the energy regulator’s tariff price cap as it reported a double-digit increase in annual operating profits.

Adjusted operating profits rose 12 per cent to £1.39bn in 2018, which Centrica attributed to higher commodity prices and strong rough gas production. Revenue increased 6 per cent to £29.7bn.

However, the energy provider expects a number of challenges in 2019, with cash flow to be affected by the rise in energy price caps by regulator Ofgem. It expects a one-off £70m hit in the first period of the cap.

Last July, the Government passed a Bill which called on Ofgem to impose a cap on all default energy tariffs, including the standard variable tariff, which came into effect at the start of the year. The company lost 742,000 customers last year, which it said was due to heightened competition in the energy supply sector with more customers switching providers.

Centrica is aiming for operating cash flow to be between £1.8bn to £2bn in 2019, which is below the targeted range of £2.1bn to £2.3bn on average over 2018-2020.

Group chief executive Iain Conn said: “Centrica’s financial performance in 2018 was mixed against a challenging external backdrop.

“At the headline level, adjusted operating profit was up 12 per cent and adjusted operating cash flow and net debt were within our target ranges.

“However, volumes in Spirit Energy and nuclear were disappointing and recovery in the North America business was slower than expected.”